1. The Estimating Work Process
A structured process ensures that estimates are consistent, documented, and traceable.
Steps in Cost Estimation:
- Define Scope and Work Breakdown Structure (WBS)
→ Identify all activities, deliverables, and quantities. - Collect Data
→ Historical project costs, productivity rates, supplier quotations. - Develop Unit Costs
→ Material + Labor + Equipment + Overheads + Profit. - Apply Pricing Models
→ Use cost-capacity factors, ratios, or database-driven tools. - Review and Validate
→ Conduct internal peer reviews and management sign-offs. - Document and Archive
→ Record assumptions, exclusions, and risk notes for traceability.
2. Cost–Capacity Curves
Used primarily in early stages when detailed data is limited. The relationship between capacity (size) and cost is not linear but follows a power law.
Formula:
C₂ = C₁ × (Q₂/Q₁)ⁿWhere:
- C₁ = Cost of existing facility
- Q₁ = Capacity of existing facility
- C₂ = Estimated cost for new facility
- Q₂ = New capacity
- n = Cost-capacity exponent (typically 0.5–0.9)
Example:
If a 100 MW power plant costs ₹600 Cr, what’s the estimated cost for a 150 MW plant with n=0.6?
C₂ = 600 × (1.5)⁰·⁶ ≈ ₹760 Cr. (approx.)
Interpretation:
As capacity increases, cost rises — but not proportionally, due to economies of scale.
